The focus will now be on the capital markets & the economy in longer
trm perspective...I have wanted to do this for a long while and have
wearied of outlining near term perspectives...Short term opinion has
become an overcrowded field...

About Me

Retired chief investment officer and former NYSE firm
partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader,
and CIO who has superb track
record with multi $billion
equities and fixed income
portfolios. Advanced degrees,
CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms:
CAVEAT EMPTOR IN SPADES !!!

Sunday, September 25, 2005

I have made some terrific calls over the years, but makingcalls in markets is not my strong suit. So any call I makerequires a disclaimer as to veracity.

That said, oil looks like it's put in a top up at $70 and change per barrel. There's support at $60 and again in themid-50s, but I think it will drop to $45-50 per barrel beforeyear's end.

Globally, conservation efforts should be taking hold. Householdbudgets will also be trimmed some as well. OPEC may well push up production in the weeks ahead. The US will gradually add back 1million bd. It is not hard to see surplus at the wellhead moveup to 3 million bd. for a while before the end of this year.That should be enough to assuage the shortage mentality that hasgripped a market yet to experience any shortages.

To me, natural gas over $10 per mcf is also hyper-extended, and itwould not surprise me to see gas down under $10 before long either.

Friday, September 23, 2005

In the end, trading is about booking profits. You do nothave to be first on the right side of the market and thereis no sin to leaving a little money on the table.

Rita is going to hit land full force about 24 hours from now.It will be a major event and forecasters say that with thejet stream way north, the storm will linger and not dissipateas quickly as did Katrina.

Next week will be soon enough for me to look at opportunities.I am particularly interested in seeing what the total billmight be for reconstruction / redevelopment in the wake ofboth storms and how economic policy will respond.

Wednesday, September 21, 2005

First, Katrina rolled in and did phenomenal damagein Miss. and Louisiana. Now Rita is humming through theGulf, building strength as it is nurtured by the warm waters.It reached Cat. 4 quickly and could easily attain Cat.5.The tightening of the storm's bands and rapid build up inwind speed now suggest a smaller but more concentrated and powerful storm than Katrina.

If it makes landfall in Texas as a Cat. 4 or 5, it willdo tremendous economic damage, particularly in coastaland nearby residential areas. It is too early yet to tellwhether the storm will pass close enough to the Houston Channel to damage up to 1 million bd. of potentiallyexposed oil refining capacity. The storm needs to makea Northward turn first before specific target areascan be singled out.

If the storm stays strong and slams coastal Texas, theresultant damage, coupled with the destruction wrought byKatrina, could well throw economic policy into a cockedhat, as legislators and the Fed struggle to come to grips with a suitable reconstruction plan.

Rita, unlike Katrina, has the President's attention andyou can bet that Rita's damagees would have considerableclout with GWB.

Traders are looking for an opening to grab a rallyalong the lines of "sell the rumor (Rita's spectre), andbuy the fact (Rita's arrival)". Not my cup of tea unlessRita somehow weakens and or misses the US.

I plan to see just what this broad winds up doing beforeI take a serious look.

Tuesday, September 20, 2005

Over the last several weeks, I have been thinking abouteasy ways to conserve on fuel use without making anysubstantial $ investment. And, as I thought about it,I realized there were indeed a number of ways to cut downon both gasoline and heating expenditure without greatlycrimping lifestyle. I have been doing so with the caras have the wife and kids with theirs.

I bring it up because I suspect that many in the US, Canadaand Europe are thinking similarly. What is interesting, I believe, is that fuels demand may still be quite a bit moreelastic than many of the fuel demand models and projectionsI see. I do not think it is that difficult to knock 2% offmy demand or that of most others. Globally, that would restoreabout 1.6 mil. bls a day to supply, a sizable increment.

I suspect it may be worthwhile to begin to incorporateallowances for conservation into one's thinking about oiland gas, because I doubt the price channels for both thathave been in place for the past year or two reflect it.

Friday, September 16, 2005

People are reviewing how they can cut their fuel bills and whether to trim or defer spending on the most discretionary items. So, maybeoil/gas demand growth will decelerate for a while in the US at least.Ditto for Europe.

The massive mid-Gulf redevelopment program will favor heavy industry,construction, technology and industrial and commercial services.

Rotation should be pro-cyclical in the stock market.

As orders flow in to production sites, operating rates should rise,and inflation pressures will broaden.

The bond market viewed rising oil and gas prices as a tax on consumption,not an inflationary development. It will be vulnerable to rising operating rates and higher sensitive materials prices.

Gold is a mug's game. It was safe enough to buy it in recent yearswhen it was selling below its commercial value, but it has justmoved above that level and the gold bugs and hucksters will becoming out of the woodwork to tout it.

The economy is slowing now, but looks to pick up speed in 2006as the big project down south unfolds. I do not know what the Fedwill do Sep. 20, but if the redevelopment program is as large as itnow looks to be, short rates could eventually go quite a bit higher.

There should be no dollar dumping from abroad, not when the US isworking out of an emergency situation. US retaliation would be swift.

You know George, he is going to try and borrow all he needs torun the war, redevelopment and other programs that may be onhis short list. That could be a negative for the bond market.

The mis-handling of the rescue efforts in the Gulf in theearly going gutted Bush's presidency. If this inept man drops theball on the redevelopment program, his Party could be badly mauledin 2006.

Tuesday, September 13, 2005

The rally underway since the end of 4/05 has served to extendthe second leg of the cyclical bull market.

There are cycle factors which suggest the broad market should bein a topping mode over the course of most of this month. Curiouslyenough, most of the short and intermediate term indicators I followsuggest the market turned up around the beginning of the month.However, what is most striking to me is the substantial compressionin the proprietary momentum and internal demand / supply indicators I follow. I have never been able to figure a sound method to tellhow extended compression periods will be resolved (topping out vs.consolidation). It is clear there has been an ongoing battle between the bears and the bulls since early July, 2005. My charts suggestthis battle could go on for up to four to six weeks before it isresolved. When extended compression periods are resolved, the movein the market, be it up or down, is usually sure and powerful.

I am a discretionary trader and a trend follower, but I have hesitatedto go long so far this month because of the compression I see inthe market. So, I may just wait until that issue is resolved beforedeciding what to do.

Friday, September 09, 2005

The sharp spike in the price of crude led the stockmarket to shade the multiple in anticipation of higherinflation readings for August and perhaps September.The fast erosion in the price of crude since Katrinastruck and oil market fears were finally realized hasproduced a sharp relief rally which restores the p/e ratioback up close to 17x, and leaves the market content witha 3.0% inflation expectation. Currently the market reflectsa consensus that the worst in oil's steep price rise hasended and that Katrina will not produce longlasting economic damage. Note again though how sensitivethe market continues to be to the price of crude.

Tuesday, September 06, 2005

Uncle Al talked tough the other week out at Jackson Hole, WY.But, in vintage style, the Fed has removed its foot from the brake. It has been buying bonds for its own portfolio, and itsversion of the monetary base has started to grow. I think thisdevelopment commenced to meet seasonal "add" needs to coverback to school shopping and then the holiday season down the road. It remains to be seen whether post-Katrina economicdevelopments will promote further easing. Note that the Fed,by jiggling reserves day-to-day, can push short rates highereven as it adds liquidity to the system.

I bring this up not only because it is worth watching to helpglean the intent of monetary policy, but also because the largeprimary dealers, who are also big players in the currency, commodity, and stock markets, use their knowledge of changesby the FOMC to trade. These advance notice liquidity indicatorsare FALLIBLE markets guides, but players need to pay attention.

When the Fed is adding to its portfolio, it tends to benefitstocks and gold, and to hurt the dollar. This easing canalso lift the commodities markets and bond prices, but giventhe peculiarities of this cycle, the bond market might growuncertain since the bulls have been counting on tight money.

The Fed can run this type of easing for a few months withoutcompromising its longer term intent, which based on the longer rungrowth trends of Fed Bank Credit and it monetary base, continueto support a restrictive policy approach.

Thursday, September 01, 2005

Based on economic data available through today, 9/01, the cyclical case for boosting the FFR% at the 9/20 FOMC meetingremains in place. Moreover, with inflation at 3.1% andaccelerating, an FFR of 3.5% as a short rate anchor is asavings dis-incentive, which continues to weaken theinternal or domestic purchasing power of the dollar.

Now, as indicated yesterday by Phila. Fed Gov. Santomero,the Fed will have to take in a thorough briefing of the likely economic effects of Katrina's punch to the systemin deciding whether to move ahead with another rate increase.

A key factor in deliberations should be the rapid rise infuel costs relative to consumer disposable income. The fuelbill is rising rapidly from a very low base and is hardlyhigh relative to DPI historically. Even so, the momentum ofchange, being very rapid, could disrupt household budgetsin the months ahead. Secondly, the Fed will have to gaugedirect output and income losses from Katrina since theselosses will be consequential, at least for the short term.

I have never found it helpful to probe the collectivepsyche of FOMC prior to a meeting. So, I am just guessingthey will go ahead with a FFR% boost if there is nomajor red flag in the data available to them on 9/20.